India’s defense budget for the fiscal year 2025-26 is set at INR 6.81 trillion ($77.8 billion). This marks a nominal rise of 6.2% from the previous year’s revised budget. However, when we exclude pensions, the effective budget drops to INR 5.21 trillion ($59.5 billion), which is about 1.4% of GDP. This means the real increase is only 3.83%, and inflation complicates the situation further.
The Reserve Bank of India expects inflation to hit 4.2% for the coming year. This makes the modest budget even more concerning. With rising costs, India’s military faces challenges in staying ahead of inflation and shouldering the burden of potential threats from China and Pakistan.
China’s military budget is significant—around $233 billion, and some estimates suggest even higher figures. This means China invests far more in its defense compared to India, raising alarms about India’s military readiness.
One glaring issue in the budget is the large portion allocated for pensions, which takes up 24% of the total. This focus on pensions does not enhance the operational capabilities of the armed forces. In contrast, the capital expenditure for modernizing military assets—a crucial component for defense—is set to rise only 4.65%, reaching INR 1.8 trillion ($20.56 billion). This includes money for new equipment, research, and infrastructure development.
Unfortunately, much of this modernization budget will pay for existing contracts rather than new purchases. About 80% of this capital budget will cover previous commitments, which leaves little room for urgent new acquisitions.
India aims for greater self-reliance in defense. A substantial part of the modernization budget will go towards domestic suppliers, supporting Prime Minister Narendra Modi’s “Atmanirbhar Bharat Abhiyan”, or Self Reliant India campaign. This initiative focuses on producing defense goods within India to reduce dependence on foreign imports.
Yet, despite this push for self-reliance, India remains the world’s largest defense importer. Its procurement process is often slow and cumbersome, resulting in delays that can last years. Consequently, new systems can take a long time to reach the armed forces.
The interplay of an evolving defense industry, a flawed procurement system, and an inadequate budget creates a widening gap between India’s regional ambitions and the realities of its current defense landscape. While India aspires to enhance its military power and capabilities, the latest budget does little to support these strategic goals.
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defense budget,India,Indian Navy,Indian Ocean Region,military spending
